The Bangko Sentral ng Pilipinas (BSP) has approved a new capital reform requiring banks to maintain releasable capital buffers that can be tapped during periods of financial stress to sustain lending activity.
In a statement, the central bank said the measure applies to universal and commercial banks, their subsidiary banks and quasi-banks, as well as digital banks.
Under the reform, banks will maintain a Positive Neutral Countercyclical Capital Buffer (PN-CCyB), which may be accumulated during periods of strong credit growth and drawn down during economic stress.
BSP Governor Eli M. Remolona Jr. said the reform would help strengthen the country’s financial stability.
“The reform will strengthen the country’s financial stability as it enables banks to set aside capital that can be released in bad times to keep credit flowing to households and firms,” Remolona said.
The BSP clarified that the PN-CCyB does not increase banks’ overall capital requirements. Instead, the framework reallocates part of banks’ existing Common Equity Tier 1 (CET1) capital into a releasable buffer.
Under existing rules, banks are required to maintain CET1 capital equal to at least 6 percent of risk-weighted assets. Under the new framework, 1.5 percent of CET1 capital will be designated as a releasable buffer, leaving a minimum CET1 requirement of 4.5 percent of risk-weighted assets in line with Basel III standards.
Capital limits stay
The BSP said all other capital requirements, including the minimum Tier 1 ratio and Capital Adequacy Ratio (CAR), will remain unchanged.
The central bank said the reform comes amid heightened global risks and geopolitical uncertainties, particularly those stemming from the crisis in the Middle East. The latest measure aligns with the BSP’s April decision to offer temporary relief options for borrowers affected by the State of National Energy Emergency declared on 24 March.
The BSP noted that the banking sector remains well-positioned to adopt the measure, with the industry’s CET1 ratio standing at 15.06 percent as of end-December 2025.
“The Philippines joins countries that have built releasable buffers ahead of potential crises. This enhances our ability to respond swiftly to shocks without increasing the overall capital burden on banks,” Remolona added.
The new rule under BSP Circular 1235, Series of 2026, will be implemented in phases. Universal and commercial banks, including subsidiary banks and quasi-banks, will be given one year to comply, while digital banks will be given two years.
